Question
14. Given the same information from Question 13 and that Stock X has an expected return of 4% and a standard deviation of 9.17%, how
14. Given the same information from Question 13 and that Stock X has an expected return of 4% and a
standard deviation of 9.17%, how will you choose between Stock X and the portfolio (50% Stock X + 50% Stock Y)?
A) Stock X is a better investment, since Stock X has a higher expected return.
B) Stock X is a better investment, since Stock X has a higher lower standard deviation.
C) The portfolio is a better investment, since the portfolio has a higher expected return and a lower standard deviation.
D) It depends. Neither is strictly better. Although Stock X has a lower expected return, the portfolio has a higher standard deviation.
7. The terms ________ and ________ mean the same thing.
A) nondiversifiable risk; unsystematic risk
B) diversifiable risk; systematic risk
C) nondiversifiable risk; systematic risk
D) total risk; unique risk
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